Gender Equality, Tax, And The Pandemic

Yvette Lind, an assistant professor of tax law at Copenhagen Business School, talks about how the coronavirus pandemic hurt gender equality and offers possible tax solutions.

The post has been edited for length and clarity.

David Stewart: Welcome to the podcast. I’m David Stewart, editor in chief of Tax Notes Today International. This week: gender equality and pandemic fallout. 2020 was supposed to be a banner year for women. The United Nations planned it to be a groundbreaking year for gender equality initiatives. And here in the U.S., we were celebrating 100 years since women won the right to vote.

Instead, however, the coronavirus pandemic hit, putting at risk the limited gains that were being made on equality issues. Yvette Lind is an assistant professor of tax law at the Copenhagen School of Business and recently coauthored a piece in Tax Notes looking at the impact of COVID-19 on gender equality and using the examples of Denmark and Sweden, the role of domestic tax systems. Yvette, welcome to the podcast.

Yvette Lind: Thank you, and thank you for having me.

David Stewart: Can we start from perhaps a historical perspective of how have tax systems tended to disadvantage women?

Yvette Lind: The basics and the core of gender equality on taxes and tax policy is to look at how women not only have equal access to labor markets, but also equal opportunity. You have to look at it from a societal perspective as well and not just from the tax code. We have to look at if women are allowed to work in the labor force, the extent to which they are working, and what opportunity they have.

The main traditional role in most societies historically, but also presently, is to have a family unit where there is a breadwinner. We call it the breadwinner model, in which usually the main partner in a relationship will have this traditional role as the provider. They will work full time and take care of the family financially while, most commonly, the woman will stay at home either full time or work only part time and take care of the children and take care of the home in what would be referred to as unpaid work.

This has historically been a problem for gender equality from many perspectives. It prevents women from actually gaining access to the labor market. It financially impacts them in many ways. Women will have a lower pension compared to men because they’re not working as much.

That being said, that is the basics. That’s also from the Nordic welfare state model. We don’t have joint taxation anymore; we have individual taxation. But I know in the U.S. and in many conservative countries like Germany and the Mediterranean countries, they still apply this tax unit model where we still have the promotion of the breadwinner model and the breadwinner family, where the male works full time.

That is the basics of gender equality when we apply the tax code and tax policy.

David Stewart: What sort of approaches have been taken to address gender equality through tax and otherwise?

Yvette Lind: Interestingly enough, the most common view would be for the tax code to be gender neutral. If the legislation is gender neutral, somehow one expects the outcome to be gender neutral. Those of us who are more focused on critical studies of gender equality research actually criticize that perspective. It’s not that easy.

In many cases, gender neutral legislation has often made women worse off. To be honest and a bit blunt, it’s naive to say that if you have neutral legislation or a neutral tax code, everything will resolve to neutrality between the genders. It won’t.

One good example would be Denmark’s widow pension. Historically, there was a special pension provision only awarded to women. This is natural because women naturally live longer lives than men and women have also tendency due to societal expectations to marry older men and live longer than their men as well.

Women will need additional support. Not only will they generally have lower pensions to begin with, but they will also not have a provider for the last term of their lives. In this way, we did have a widow pension in the tax code. Then we made the tax code gender neutral, and removed the widow pension because it was promoting women. We were going to apply this gender neutral. In that sense, it actually hurt women because they got less now for the pension. This is a good example of how gender neutrality sounds good, but it’s not really when you apply it in reality.

In reality, men and women are not equal. I already said, naturally we women will live longer. Society wise we will marry older men. We will work less in the labor force. We will work more in the home in unpaid work. We will take care of the children. All of this will have an impact on our financial results and our economic situation.

In this aspect you have to take that into consideration, and that’s where gender researchers normally come in and give advice. To me the most obvious resolution to many gender equality problems would be to start applying individual taxation. When you apply joint taxation as many states still do, you actually incentivize and encourage families to apply this traditional model of one working full time and one working nothing or part time. By forcing them to be taxed as individuals, you will incentivize additional labor force participation and you will make it easier for women to participate.

Women will often face obstacles in the labor market when it comes to promotion or salary increase. Their employer will say that they’ve worked less than their male colleagues because they were staying at home with children or they have been on maternity leave. Many countries have legislated equal share of paternity leave.

Finland, for instance, is now forcing men to stay at home an equal amount of time as the mothers otherwise they will not gain support from the state. That is one incentive to crush this hindrance. Employers will no longer be able to say, “You spend less time than your male colleagues.” Because if the male colleagues naturally also spend as much time at home, that won’t be an issue. There are many, many aspects to play in, but definitely that individual taxation versus joint taxation will be one big thing.

David Stewart: I’m curious about this question of the tax systems. Being from the U.S., I’m used to the joint system. When I look at the individual model, I wonder how does one move from a joint system to an individual system without disadvantaging people who have been advantaged by the existing system?

Yvette Lind: It’s a really good point. All changes will have impacts. No solution is going to make winners of it all.

But Sweden, for instance, had its big change in the 1970s. That’s when we went from joint taxation to individual taxation. We simply came to a societal need for additional labor force. The state said that we need additional workers and we can’t afford as a society that half of the workforce is actually staying at home. For us, it was more or less also a societal change. There was enough work for women to participate in a labor market.

I don’t know exactly the U.S. situation, but I feel a lot of women are often ending up with part-time work. One big change here would actually be to facilitate full-time employment because if the family actually could have full-time employment for both spouses, it wouldn’t be such an economic hit for them. They will pay more taxes if both work than if one stays at home. But as long as they have full-time employment to rely on, that will somehow mitigate the change if I’m thinking correctly here.

David Stewart: Turning to the current biggest topic of the day — the pandemic — what issues has the pandemic raised that has hurt the push toward gender equality?

Yvette Lind: Just before the pandemic hit, we can see that women had a bigger tendency to work part time and not full time. That in itself has hurt them more because those who have been out of work because of the pandemic are mostly those who worked part time, those who could be deemed the expendable workforce. They have been extra vulnerable because they did not have full-time employment.

In contrast to previous financial crises, the sectors that have been mainly hurt are actually healthcare, child care, and education. Children are staying at home due to strict lockdowns and the healthcare sector is being severely pushed to its limits. But also many of the job losses and cutbacks have been in the female-dominated sectors.

Women have been hurt in many aspects. In the labor market they’ve been hurt. They’ve lost their jobs if they have been hit in specifically vulnerable sectors. But also when there are lockdowns and people are forced to stay at home working, the one who traditionally takes care of the child when both are home is the female. And I don’t think anyone is surprised that if you have colleagues staying home with children, most of them will be taken care of by the spouse.

That also hits and affects not only your labor participation, but also your labor results, especially if you actually have to quit your job in order to take care of your children at that point.

David Stewart: You looked at the examples of Denmark and Sweden for your paper that was published in Tax Notes. Could you tell me about their responses to the pandemic and whether the choices they made helped or hurt the cause of gender equality?

Yvette Lind: It’s very interesting to compare Sweden and Denmark. I always enjoy those discussions being from Sweden myself originally and now living in Denmark because they’ve had such different reactions.

Denmark was one of the first states among the European Union states to close down. We did not have a super strict lockdown like in Australia or the United Kingdom, for instance, but most industries are locked down. Most people are working from home.

In Sweden, it’s quite the opposite. There’s never been a strict lockdown. In fact, the schools are still running. Child care is open. People are working to large extent at their workplace and not from home. That has of course had a positive impact in the sense that women have been able to keep working. But there are other impacts that are perhaps less beneficial for women.

We can also look at the state aid packages or the financial support packages that have been launched by the two countries. Since Denmark closed down early, they started pumping money to support the business sectors quite early on. Sweden has not. Sweden has argued — rightfully so, I guess, from the start — that since it didn’t lock down or close so many businesses, there was no need for financial support.

The business sector has complained because even if you don’t close down the sector, there have been less people shopping and less money flowing in. Now they have started paying out financial support in Sweden as well, but not to the same extent.

Both countries have similarities to most EU member states. They follow the EU recommendations and paid out support to the business sectors primarily. Those sectors that have been supported are mainly male dominated. In this sense, it’s been supporting male-dominated sectors and men.

I thought it was super interesting that Miranda Stewart from Australia told us that they’ve had a very strict lockdown and most of their financial support has not gone to the business sectors. It’s actually gone to households. In this sense you can support individuals better. I think that’s very interesting.

Once this is over and we actually started comparing strategies, we can then more easily see what was more beneficial or not. I would say Sweden has had a less extensive and less good result when it comes to financial support. Thankfully for them, not closing down industries and having women still being able to participate in the labor market has had a positive effect.

David Stewart: Let’s hope that we never have to go through something like this again. But if we were to face this situation anew, how would you like to see pandemic responses financially?

Yvette Lind: I would actually love to see more of the Australian response of giving support to households and not just the business sectors. Additionally I think we need to be more open to how we design different financial aid. If it’s based upon income you should actually just look at the real situation, what is happening now, and not how it looked before. Someone who had a high income and did not qualify for financial support may have lost a job and actually be in need of support now.

I also think we need to stop handing out more general support. We actually need to be more need-based. In Denmark we had a stimulus checks that were actually paid out in accordance to salary. Those who had kept their jobs and actually had higher salaries got more aid than those who lost their jobs and were in dire need of financial aid. Pensioners and students got 500 Danish crowns, which is roughly $50. I don’t think that’s the way to go.

To be honest, we need to actually support individuals who need financial support and not just handouts in accordance to more general requirements that in the end support those who don’t have a financial loss.

Additionally we need to start thinking more about child care. If we close down the child care sector, how can we support women who are working from home? How can we prevent them from ending up in this gender trap of just being a stay-at-home wife instead of actually being able to fulfill their labor force requirements?

David Stewart: Turning to the hopefully soon post-pandemic world, are there lessons that other countries can draw from the experiences of Sweden and Denmark for addressing gender equality?

Yvette Lind: I think my coauthor Åsa Gunnarsson makes a lot of good points in the paper. What has been beneficial for gender equality in the Nordic states is the fact that we are high-tax countries. We have a lot of taxation, high-income taxation in order to support through welfare benefits to have tax transfers. That is the way to go to promote gender equality.

I actually enjoy seeing the discussions on wealth taxation or additional means to raise revenues in order to divide them more equally. We didn’t have those discussions before the pandemic. I don’t think anyone was really promoting wealth taxation or additional revenue sources at that point, but now we’re doing it. And I think that’s a really interesting discussion.

Åsa often points to tax evasion being a very big problem for gender equality and human rights because we need tax revenues to actually support essential human rights and gender equality. The discussions we’re seeing now more generally about raising revenues and taxing more equally is in itself a step in the right direction.

David Stewart: Alright, this has been a fascinating discussion. I thank you for being here.

Yvette Lind: Thank you.